On April 20, 2023, the Canadian government introduced Bill C-47, the Budget Implementation Act, 2023, No. 1 (the Bill), which includes the long awaited proposed amendments to the criminal interest rate.
If the Bill is passed, criminal interest will be defined as: "an annual percentage rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 35 percent on the credit advanced". Criminal interest will continue to include charges and expenses paid or payable for the advancing of credit and continue to exclude certain amounts such as insurance charges and amounts to be paid in respect of property taxes. Importantly, the proposed legislation excludes certain agreements or arrangements as provided for in the regulations. However, at this point, no regulations have been proposed so it is unknown which agreements are excluded from the application of the criminal interest rate provisions.
The current exception from the criminal interest provisions for payday loans is proposed to be amended to include an additional criterion: that the total cost of borrowing does not exceed the limit fixed by regulation. However, the government has not provided any information as to what they are proposing for this interest rate limit.
The Bill also includes additional regulation-making authority and includes transitional provisions that will grandfather existing agreements or arrangements. Therefore, the new criminal interest rate will only apply to agreements or arrangements entered into after the day on which it comes into force.
The government has announced that it is planning to conduct further consultations on both criminal interest and payday lending. The inclusion in the Bill of information contained in the regulations, and the additional regulation-making powers, are likely being introduced to allow the government to act quickly once they have completed their additional public consultation in respect to interest rates and payday lending.
We will continue to monitor this Bill as it proceeds through the House of Commons and the Senate. If you have any questions about the proposed amendments, please contact the authors.